How the pandemic has exposed the cracks in India’s economy and society

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Migrants carry their belongings as they leave for their native places, in Kolkata on Thursday. (ANI Photo)

Before the pandemic, it was estimated that by 2030 the cities will be the heart of the economic growth for the country. However, with the rural exodus because of the pandemic, this future is uncertain

S Gopal Puri

New Delhi/Chandigarh

COVID-19 has exposed the Indian economy to various uncertainties now. People have lost jobs; businesses are facing losses and loans in the banks are unpaid as people are unable to pay installments now. In 2017 a study of the University of Harvard revealed that India is the country with the fastest growing economy that can overtake China. As per researchers India would have been be the “World’s Economic Heart” because of the variety of new fields explored by India: Chemicals, vehicles & electronics.

But this COVID has turned out to be an “importunate” event because they were far from the pandemic, which would upset forecasts or just slow them down. According to the International Monetary Funds, the pandemic will reshape the whole India economy. They predict its decrease because people fled the cities and became unemployed. The government’s plan from April 2021 is to privatize some large companies like Air India. This income from privatization was to be spent in the health care sector.

But till May 1st, 2021 only 1.7% of the population is fully vaccinated (24 million of people). It is the first step to counter-attack the pandemic and hope for future growth.

Before the pandemic, it was estimated that by 2030 the cities will be the heart of the economic growth for the country. However, with the rural exodus because of the pandemic, this future is uncertain.

India is one of the most dynamic countries in the World mostly because the recent government has reduced taxes and wanted to open India with Foreign investment.

Migrants board the train for their native places amid a surge in COVID-19 cases across the country, in Jalandhar on Friday. (ANI Photo)

The rupee is a risk currency but the USD/INR is still bullish: With the development of the country, the economy should grow as per the Economic Forecasts. The Pandemic strongly impacted all the currencies in the world, the USD is now weaker. This can be a benefit for the Indian rupee.

With the growth of the GDP (Gross domestic product) we think that the rupee should go through many difficult times, some “years of weakness”.  In spite of that, the economy of India should recover from the effects of the pandemic and the future should be with “no serious headwinds” as it foreseen for the currency.

According to the forecasts: 80% of households might earn the average income in the future. Today it is only 50%. In 2050, the population might be higher than in China as the population growth is an increase of 1% per year.

The government needs to develop more India and attract investments with some major projects like Bharatmala: Road, highway, express highway project, Sagarmala: Establishing Coastal Economic Zones, Mega port: example of the Trivandrum International Seaport (under construction), Dholera and Gift City: Construction of new green and smart cities and Navi Mumbai program: A new international airport.

The expected growth is now well and still challenged because of the pandemic.  Many people lost their jobs and they need to find how to earn incomes.

Jayati Ghosh, Chair of the Center of Economic Studies and Planning at Jawaharlal Nehru University in Delhi said in statement: “The best-case scenario is two years of very deep economic decline”

Nevertheless, the future of India is out of the forecasts. The low participation of the woman in the market (23%, almost the lowest rate in the world) and the high rate of unemployment are a challenge. The overpopulation is a real challenge, if not well managed it can be double-edge blade and increase poverty, food unsecure, unemployment.

The estimation from WBD (World Bank Data) is that 69% of the jobs are threatened by new technologies, new software: they can do “the human job and optimize the services”. With the current issues of the borders: wars and conflicts with Pakistan and China, many major problems will still need to be overcome.

India’s growth trajectory

In the next years, India is expected to surpass China in term of population and become the country with the highest population of the world: It is a power that can be used efficiently. Technology is still an important key of the India’s population: the future will be focused on skills and creativity.

By 2025, it is said that the digital economy will be around 20% of the GDP total (Gross domestic Product). With the fast and huge increase of the GDP in the last years (1991 to 2019: The GDP increased by 772%) we expect to see India surpassing USA in 2050. Linked with Technology, the military growth and defense budget is now in the process of placing India among the top of the world.

Another important factor of the power of India is its culture and tourism: Bollywood is now the largest film industry in the World. It is not well known yet in USA/Europe, but it attracts a lot in Africa.

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